6.7.1.3 Setting Levels of Benefit Payments

Benefit-payments are classified as socio-economic rights. They are a point of contention between individualists and collectivists, who have sharply differing views upon the balance between individual responsibility and State provision (4.2.4.5).

There can be political benefits in providing socio-economic rights. A population which is hungry is likely to be restive and to destabilise society. It might be argued that politicians only offer socio-economic rights to stay in power, but a less cynical view is that people empower others to take governance decisions on their behalf in return for a reasonable opportunity to flourish. It is one of the key requirements of governance (2.1).

Benefit-payments are also a way of redistributing wealth, from those in work to those who are less well-paid or who cannot work. From a political perspective they present different challenges:

People who are in work contribute towards the cost of pensions, either through identifiable deductions or more generally through the tax system. They contribute in the expectation of being able to retire at a specific age with a fairly predictable income. The dramatic increase in life expectancy since the Second World War has made the costs of pensions much higher than was predicted when people were first told what to expect. They were by far the greatest element of welfare spending – 42% – according to an article published by Britain’s Office of National Statistics on 16 March 2016 entitled How is the welfare budget spent? for example. Attempts to reduce the costs, by delaying the retirement age or reducing the amount to be paid, have been politically difficult because people feel that a contract has been breached. And, since the number of pensioners is increasing, their votes are gaining in importance in democracies.

The costs of unemployment benefits are linked to the overall performance of the economy (3.3.8.1).

Other welfare payments and tax credits are a form of economic protection for those who are unable to work or to earn enough to support themselves and their families; the classification of who will be entitled to them and the formulae for calculating them are consequences of the political response to inequality, as described later (6.7.2.4).

These categories of benefit represent a burden on taxpayers. The political system has to produce a settlement which is perceived to be fair.